Despite increased competition and a weak economy, Sky added 46,000 subscribers in the United Kingdom and Ireland in the three months and 273,000 over 12 months, giving it an installed base of 10.7 million homes, up by more than a million in five years. Over 6 million homes now have an internet connected Sky+HD box and 5.6 million have registered for the Sky Go multiscreen service, with nearly 1.5 million of them paying for the Sky Go Extra service, up by over 300,000 in a quarter. Sky is now poised to consolidate with similar services in Italy and Germany.
Sky reported that the number of on demand downloads more than trebled to 257 million in the quarter, with its range of over 300 television box sets available online proving particularly popular.
The company said that its NOW TV service had “another strong quarter” although it does not break out figures from its total number of television subscribers, which has now reached 10.7 million across the United Kingdom and Ireland, of which perhaps a third of a million have NOW TV.
Interestingly, the total number of Sky homes is about the same as the number that only have Freeview, although around 19 million use digital terrestrial television on at least one set in the home.
The number of Sky television homes continues to rise, despite the maturity of the market and increased competition across other platforms. With an annual churn rate of 11%, Sky needs to sign up a million customers a year just to maintain its numbers. Over five years it has reported an average of 59,800 net additions a quarter, to gain over a million homes.
Sky is growing the business through the addition of broadband and telephony services. Sky now has 5.2 million broadband customers, up 75,000 over the quarter, compared to BT with 7.4 million, Virgin Media with 4.4 million and TalkTalk with 4.2 million.
Retail subscription revenue was to £1,592 million over three months, compared to £1,531 million for the same quarter the previous year. Total quarterly revenue was up 6% to £1,926 million. Profits after tax was up to £608 million, primarily due to a £429 million gain on its sale of its 6.4% stake in ITV.
The Sky AdSmart platform has now run 720 campaigns for more than 325 brands. Over three quarters of advertisers are either entirely new to television or advertising for the first time with Sky Media. Sky is now able to divide the country into 38 regions and plans to be able to address individual postcodes in the future.
Andrew Griffith, the chief financial officer, told analysts: “We’re very excited about interactive advertising as an opportunity. It’s very early days. So the numbers today are pretty small in terms of the absolute revenues, but the compound growth rates are very high and what we’re excited about is essentially we see as an opportunity to grow the market.”
Jeremy Darroch, the chief executive of British Sky Broadcasting, said: “The investments that we have made in new connected TV services are delivering growing benefits to our business. We extended our lead as the UK’s largest connected TV platform, surpassing 6 million connected homes.”
He said the company is making “good progress” with the proposed acquisition of Sky Italia and taking a majority stake in Sky Deutschland. The transaction is expected to close in mid November.
Assuming that Sky had acquired Sky Italia and a majority stake in Sky Deutschland for a total of £5.1 billion, the net debt of the group would be £5.3 billion, including consolidation of debt in the German operation.
The total number of Sky television homes in the United Kingdom and Ireland, plus Italy and Germany is now around 19.27 million, with an addressable market of around 100 million homes.
That would currently rank Sky at number three in the informitv Multiscreen Index of leading digital pay-television services worldwide, behind Comcast and DIRECTV. Comcast is planning to become far larger with the pending acquisition of Time Warner Cable, while AT&T would leap to the top of the table through the proposed acquisition of DIRECTV, including its operations in Latin America.
The informitv Multiscreen Index measures the performance of 100 satellite, cable and telco television and video services worldwide by their current digital subscription numbers. The latest report is available from multiscreenindex.com.